Good morning,

Finger on the trigger

UK Prime Minister, Theresa May, could trigger Article 50 as soon as tomorrow, according to press reports over the weekend and, in doing so, reclaim up to £9 billion of assets from the European Union’s investment bank in an effort to bring the EU’s exit price lower. While there’s little unexpected in the timing of May’s notification to the EU, breaking ties with your single largest trading partner by seizing assets could appear overly aggressive to some. Sterling’s taken the speculation in its stride and is trading stronger against both the dollar and the euro this morning. The proximity to the Dutch elections on Wednesday may be too much for some to bet against the pound at this pretty crucial juncture.

Going Dutch

This week’s Dutch election is the first of three political trials this year for the Eurozone, followed by the French elections in April and May and Germany’s Federal elections in the autumn. The odds are that Geert Wilders’ right-wing PVV party will win a significant number of seats and could become the largest party in the Dutch parliament. Despite this, the opposing stance of the rival VVD and PvdA parties means it’s highly unlikely Wilders would be able to form a coalition government under the Netherlands’ power-sharing rules, leaving that to the more centrist parties in a continuation of the status quo.

For the euro, this would likely be a net neutral outcome, leaving France’s elections in the next two months as the biggest risk to the single currency. Dutch voting would have to shift significantly toward Wilders’ PVV from their current levels to increase the chances of him becoming leader which, while not impossible, is certainly not a likely scenario. It’s worth keeping an eye on the recent diplomatic spat with Turkey, however, which continues to alienate itself from the Union of which it’s an aspiring member. The party leaders’ attitudes toward the souring relations with Turkey could swing a fair few votes.

Fed takes the plate

Friday’s nonfarm payrolls report cleared the way for the Fed; 235,000 jobs were added in February, pressing the unemployment rate to a new low of 4.7%. This removed the final hurdle for the Fed which, on Wednesday, is expected to lift interest rates for the third time since the financial crisis – and it appears the market’s already prepared for it, with a 25bps rate hike already close to 90% priced in. Instead, what the market’s been focusing on is not when the next rate hike will occur, but the hike after that and, even, the hike after that. This focus on the pace at which future interest rates will rise has placed a lot of upside pressure under the dollar and, with no further political elections or events in the near future, it’ll take a lot to taper the performance of the greenback in 2017.

Have a great day.